Disputes Quick Read: the challenges to challenging an arbitration award

Parties choose arbitration over litigation for its confidential and final nature. But with proceedings taking place behind closed doors and limited prospects of challenging a final award, who's keeping watch over the process? 

Section 68 of the Arbitration Act 1996 (the 'Act'), one of three limited avenues available for parties to challenge a final arbitration award, relates to failings in the arbitral process itself, rather than the accuracy of the tribunal's decision. 

It provides a gateway for parties to challenge an arbitral award in court where there's been a 'serious irregularity' which has affected the tribunal, proceedings or award. It applies to all arbitrations subject to its scope and parties cannot opt out of it.

The grounds on which an application can be made to the court under s.68 are prescriptive and intentionally limited, requiring the affected party to show that the irregularity has caused a 'substantial injustice'. The substantial injustice test was intentionally introduced to create a high bar, reflecting a policy of support for private arbitration, and to limit interference by the courts.

As the authors of the Act explained, s.68 is 'really designed as a long stop, only available in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected'.  But just how extreme does a case need to be for courts to review a decision?

The non-interventionist trend

A recent report  on arbitration trends over the last 11 years found there were very few s.68 challenges referred to the court, and even fewer which were upheld. In that period: 

• only 538 cases were decided by the English courts in the last 11 years which substantively concerned a provision of the Act  
• in the case of referrals under s.68, only 125 challenges were made during the report period, of which 105 resulted in a decision  
• of those decided cases, only 14 challenges were successful.

These figures are often rightly seen as a reflection of the courts' strong, pro-arbitration approach; one which doesn't interfere in the parties' dispute resolution arrangements which they've freely entered into.

But as arbitration becomes increasingly popular there's arguably a shortfall in accountability caused by an absence of any clear and effective mechanism for reviewing the way in which arbitrations are conducted. Only 14 successful s.68 challenges over an 11-year period seems remarkably few. For court users, hearings are public and there's an established appeal mechanism to ensure consistency in judicial decision making. The same isn't true for those who agree to arbitrate.

Is there a case for greater oversight?

In November last year, the Law Commission announced that it will conduct a review of the Act "to ensure that the UK remains at the forefront of international dispute resolution".  It hasn't yet been confirmed what areas of the Act will be under review, but whatever areas are looked at, clearly the aim should be to modernise and reinforce England as a leading centre for international arbitration.

With that in mind, perhaps now is the time to look at s.68 and consider whether it's sufficient, or whether another mechanism is needed to ensure there's clearer oversight, ultimately safeguarding the integrity of the arbitral system.